BoJ Hikes Rates, the first time in 17 years!Yesterday, the Bank of Japan (BoJ) released its decision to end eight years of negative interest rates, adjusting the short-term policy rate to around 0.00% to 0.10%.
Although an interest rate hike is supposed to lead to the currency strengthening, the Yen weakened following the release of the news, with the USDJPY climbing higher from 149.40 toward the resistance level of 151.
The BoJ also indicated that while it will scrap its YCC framework (upper bound of 1% on 10-year JGBs) it will continue to buy some Japanese Government Bonds (JGBs), maintaining a Quantitative Easing (QE) approach, hence keeping some aspect of the accommodative policy.
Markets anticipate that this could be a one off adjustment, and the BoJ is unlikely to follow yesterday's rate decision with a series of rate hikes. This could be considered as a Dovish rate hike.
The divergence in monetary policies between the BoJ and the FOMC (and other major central banks) continues, which is likely the cause of the continued weakness of the Yen.
Today, the Yen has continued to weaken, with the USDJPY breaking above the round number resistance of 151, and is likely to retest the historic high of 151.90, last reached in November 2023.
Attention now shifts toward the FOMC.
